Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Indices show catastrophe bond market fully recovered


We’ve been bringing you regular monthly updates on the Swiss Re Cat Bond Performance Indices for over a year now (our latest here) and have been following the return to health of the cat bond market as evidenced by the rising indices. Now Swiss Re have published a report which echoes that sentiment and provides some insight into their thinking on the state of the market.

The indices performed strongly throughout 2010 “further illustrating the health of the cat bond market and its reputation as a diversifying asset class” says the report. 2010 was the fourth year that the Swiss Re Global Cat Bond Total Return Index (which measures the return investors receive on the asset class) has achieved a double digit total return, returning 11.29% over the year. So far during 2011 Swiss Re note that it has returned 1.04% up to the 4th February, so it looks like if the market remains strong it could hit double figures again.

As well as demonstrating the returns achievable in the cat bond market, the report notes that the indices “indicate that the cat bond market has fully recovered from the financial crisis and is currently comparable to the pre-crisis environment of 2007. Increased demand for cat bonds has pushed the market value of the index above the par value for the first time since August 2005 and to the second highest year-end value, USD 12.2 billion”.

Sentiment is strong among cat bond market participants at the moment and investor interest in the asset class is growing. It’s good to see such positive statements coming from a major player such as Swiss Re.

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